Date: November 9, 2005
To: Assessors, Equalization Directors
From: State Tax Commission

RE: INFLATION RATE MULTIPLIER FOR USE IN THE 2006 CAPPED VALUE FORMULA AND THE 2006 "HEADLEE" MILLAGE REDUCTION FRACTION (MRF) FORMULA

A) Inflation Rate Multiplier Used in the 2006 Capped Value Formula

The inflation rate, expressed as a multiplier, to be used in the 2006 Capped Value Formula is 1.033.

The 2006 Capped Value Formula is as follows:

2006 CAPPED VALUE = (2005 Taxable Value - LOSSES) X 1.033 + ADDITIONS

The formula above does not include 1.05 because the inflation rate multiplier of 1.033 is lower than 1.05.

B) Inflation Rate Multiplier Used in 2006 "Headlee" Calculations

The inflation rate multiplier of 1.033 shall ALSO be used in the calculation of the 2006 "Headlee" Millage Reduction Fraction required by Michigan Compiled Law (MCL) 211.34d.

The formula for calculating the 2006 "Headlee" Millage Reduction Fraction (MRF) is as follows:

2006 MRF = (2005 Taxable Value - LOSSES) X 1.033
                          2006 Taxable Value - ADDITIONS

C) The following is a listing of the inflation rate multipliers used in the Capped Value and "Headlee" calculations since the start of Proposal A:

1995	1.026
1996	1.028
1997	1.028
1998	1.027
1999	1.016
2000	1.019
2001	1.032
2002	1.032
2003	1.015
2004	1.023
2005	1.023
2006	1.033